Microchip Technology Inc.
) has been consistently distributing dividends since fiscal 2003
and currently has a solid 4.0% dividend yield. Shares of this Zacks
#2 Rank (Buy) semiconductor manufacturer have been trading higher
on the successful completion of the SMSC acquisition, a
distribution agreement with Arrow and new product launches.
Earnings Flashback and Other Driving Catalysts
On August 2, Microchip Technology Inc. reported fiscal first
quarter 2013 adjusted earnings per share (including stock-based
compensation) of 43 cents, 2.3% behind the Zacks Consensus Estimate
of 44 cents and 15.7% below the year-ago earnings. Net revenues
were down 6.0% year over year to $352.1 million.
However, things are expected to improve in the fiscal second
quarter 2013 as management sees net sales between $412 million and
$430 million, up 17% - 22% sequentially. This includes a
contribution of about $65-$70 million from Standard Microsystems
Corporation (SMSC) products. EPS is forecasted between 50 cents and
52 cents, an improvement from 48 cents in the fiscal first quarter.
Along with the earnings release, Microchip Technology announced the
acquisition of Standard Microsystems Corporation (SMSC) for $37 per
share in cash. The acquisition expands the company's smart
mixed-signal connectivity solutions for embedded applications in
markets such as automotive, industrial, computing, consumer and
wireless audio. Management expects the acquisition to be accretive
to the bottom-line in the fiscal second quarter of 2013.
Recently, Microchip entered into a global distribution agreement
with Arrow Electronics, Inc., (ARW), whereby the former's broad
range of embedded semiconductors and solutions will be offered
through Arrow's components portfolio and Nu Horizons Electronics.
Also, Microchip came up with four new devices for its serial SRAM
Earnings Estimates Move Higher
Over the last 30 days, the Zacks Consensus Estimate for fiscal 2013
moved up by 1.1% to $1.90 per share. Out of six total estimates,
three moved higher and one moved lower in that time. Meanwhile, the
Zacks Consensus Estimate for fiscal 2014 increased 6.8% to $2.21
per share as all five estimates moved north.
These estimates represent year-over-year earnings growth of 10.3%
for fiscal 2013 and 16.3% for fiscal 2014.
Regular dividend payments have been one the company's most
attractive features since it started dividend distribution in 2003.
A 5-Year average dividend yield for Microchip Technology stands at
4.5%, while the stock currently yields a solid 4.0% based on the
annual dividend rate of $1.40 per share.
Microchip Technology is currently trading at a forward P/E of 18.8x
compared with 17.0x for the peer group. The company's PEG ratio is
currently at 1.67. ROE stands at 17.1% compared with the peer group
average of 17.8%.
As can be observed from the Price & Consensus chart below;
after plummeting in 2009, the company revived and reached a new
peak in the mid 2011. Prospects appear bright as the Zacks
Consensus Estimates are trending higher for future years.
Despite weak fiscal first quarter results, its regular dividend
payouts, strategic acquisitions, new product launches and promising
outlook make Microchip an attractive investment option.
Microchip Technology is headquartered in Chandler, Arizona, and was
incorporated in 1989. The $6.9 billion company operates in the
semiconductor industry and develops and manufactures
microcontrollers, memory and analog and interface products for
embedded control systems.
MICROCHIP TECH (MCHP): Free Stock Analysis
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